Do you have a power of attorney? Financial and medical power of attorneys are essential building blocks of a good estate plan. We often encourage our clients to name a primary and several alternates, and many times clients choose to make them effective immediately rather than wait to become incapacitated for reasons of convenience and ease of acceptance of the document.
But what if your power of attorney is not accepted? According to the article below, financial institutions are becoming more and more reluctant to accept such documents for fear of being an unwitting party to fraud. The article alleges that persons named as power of attorney – say, a child for a parent – are increasingly abusing their privileges and helping themselves to mom’s money. As a solution to this problem, the WSJ suggests ways to plan around using a power of attorney, or steps to take to make it more likely that they will be accepted. How could these solutions work for Texas law?
– Set your power of attorney to “spring” into action when needed. In other words, do not make it effective immediately, but specify that the document only becomes effective when a doctor has declared that a person can no longer make financial decisions. This is easy to do under Texas law; you choose option “B” when you sign your document. The article correctly identifies a problem that in the heat of a crisis, you will have to stop and find a doctor. I have found that in most circumstances, this is not difficult.
– Keep it Current. The article suggests that you come back in and “re-up” your power of attorney every six months. It also mentions that some insurance companies (and I have run into this problem once) require a power of attorney signed within 60 days. So what happens when the person does become incapacitated and can no longer re-sign every six months? Is the bank or insurance company going to refuse to use the most recent copy, just because it is older than six months? I find the concept of resigning every so often to be completely contrary to the concept of a power of attorney. The whole idea is to designate someone you trust to take care of your affairs should you become incapacitated. Very few of us can put a date on when that might happen. Texas law provides for, and our office uses, a Statutory Durable power of attorney. “Statutory” means the document is backed up by a statute that spells out when a financial institution, or anyone who relies on a power of attorney, is liable for misconduct on the part of the agent. They are very rarely liable. “Durable” means that the power of attorney survives disability. This article seems to suggest that word has no meaning.
– Utilize a Trust. This is not a bad suggestion, but perhaps overkill for most persons. There are protections in place for people whose plans fail – most of those protections come in the form of guardianship, which is less than desirable. Having a backup plan is not a bad idea if you are willing to spend the money on a backup plan that you may well never need.
This article is very interesting, and I suggest you read the rest of it. I disagree with a lot – but I realize that the people offering this suggestion quite often only see the situation after it has fallen apart, and do not get to see that when it works, it can work quite well.